A plea against the World Bank

16 November 2006 by Eric Toussaint


1) During its sixty years of existence, the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

has actively supported all the dictatorships and all the corrupt regimes of the U.S.-allied camp.

2) Despite having detected massive misappropriations of funds, the Bank has maintained, and even increased, the amounts loaned (see the classic case of Congo-Zaire under Marshall Mobutu after the Blumenthal report in 1982).

3) Through its financial support it helped prop up the dictatorial regime of Habyarimana in Rwanda until 1992, thus allowing the army to increase its strength five-fold. The economic reforms it imposed in 1990 destabilized the country and aggravated the latent contradictions. The genocide that the Habyarimana regime had been preparing since the end of the 1980s was effectively perpetrated from 6 April 1994, leading to almost one million deaths among the Tutsis (and moderate Hutus). Subsequently, the World Bank demanded repayment of the debt contracted by the regime responsible for this genocide. [1]

4) The Bank supported a number of dictatorial regimes in the other camp (Romania from 1973 to 1982, China from 1980) in order to weaken the USSR before its collapse in 1991.

5) It has supported the worst dictatorships until they were overthrown. For example: its classic support for Suharto in Indonesia from 1965 to 1998, for Marcos in the Philippines from 1972 to 1986.

6) It has actively sabotaged progressive experiments in democracy (from Jacobo Arbenz in the first half of the 1950s in Guatemala, to the Sandinistas in Nicaragua in the 1980s, and of course Salvador Allende in Chile from 1970 to 1973).

7) The Bank finances tyrants and then demands that their victims repay the odious debts contracted by their oppressors.

8) In the same way, the Bank has forced countries gaining independence at the end of the 1950s and early 1960s to repay odious debts contracted by former colonial powers for the purpose of colonizing these countries.

9) The Bank has given financial support to countries (South Africa and Portugal) that were under a UN-decreed international financial boycott.

10) The Bank has supported a country that annexed another by force (the annexation of East Timor by Indonesia in 1975).

11) On the environmental front, the Bank continues to pursue a productivist policy that is disastrous for populations and detrimental to nature. [2]

12) Among the projects least respectful of human rights and directly supported by the Bank is the « transmigration » project in Indonesia, many components of which may well be classified as crimes against humanity (destruction of the natural environment of native populations, enforced displacement of populations).

13) The World Bank (like the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
) aided the emergence of factors that caused the outbreak of the debt crisis of 1982. To sum up: a) the World Bank encouraged countries to contract debts in conditions that led to their over-indebtedness; b) it drove, and even forced, countries to remove capital movement and exchange controls, thereby increasing the volatility of capital and significantly facilitating its flight. This also gave considerable leverage Leverage This is the ratio between funds borrowed for investment and the personal funds or equity that backs them up. A company may have borrowed much more than its capitalized value, in which case it is said to be ’highly leveraged’. The more highly a company is leveraged, the higher the risk associated with lending to the company; but higher also are the possible profits that it may realise as compared with its own value. to speculators (failing a return to strict control of capital movements); c) it drove countries to abandon industrialization by import substitution and replace it with a model based on export promotion. The growth in exports from developing countries on the world market - where demand was stagnating - caused a fall in prices and a deterioration of terms of trade.

14) The Bank concealed risks actually detected by itself (over-indebtedness, payment crises, negative net transfers, etc.).

15) As soon as the crisis broke out, the World Bank systematically favoured the creditors and weakened the debtors.

16) Together with the IMF, it has recommended, and even enforced, policies by which the burden of debt was borne by the people, while favouring the most powerful.

17) Together with the IMF, it has continued the “generalization” of an economic model that systematically increases the inequalities between countries, and within countries.

18) The Bank has strengthened the large private corporations and weakened both the authorities of countries and the small producers. It has heightened the exploitation of workers and increased their precarity. It has had the same detrimental effect on small producers.

19) Its self-proclaimed fight against poverty fails to conceal a policy that in practice reproduces and aggravates the very causes of poverty.

20) The liberalization of capital flows, which it has systematically encouraged, has increased the incidence of tax evasion, flight of funds and corruption.

21) The liberalization of trade has strengthened the strong and further weakened the weak. The majority of small and medium producers in developing countries are unable to withstand competition from large corporations, whether in the North or the South.

22) The World Bank operates in close cooperation with the IMF and the WTO WTO
World Trade Organisation
The WTO, founded on 1st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

to enforce an agenda that is radically opposed to the satisfaction of basic human rights.

23) The Bank declares that it keeps up a permanent dialogue with civil society and with the poor, but this has not resulted in any positive changes in its policy. One observes repeated semblances of dialogue, in which the macro-economic framework is the dominant, unchallengeable one promoted by the Bank.

24) The Bank uses the groups made most vulnerable and deprived by its policies in order to give these policies a human and democratic face and to present them as being the conscious choice of these groups (women, the deserving poor, etc.).

25) When independent Commissions appointed by the Bank make recommendations that challenge the interests of its main stakeholders, the Bank refuses to follow them (see the report on extractive industries and on dams).

26) It systematically piles up profits during the most severe economic crises. The Bank gets richer at the expense of indebted countries.

27) It keeps these countries marginalized even though they represent the majority of its members, thus favouring a handful of governments in wealthy countries.

28) The Bank has shown its complete inability to reform itself. The appointment of Paul Wolfowitz, one of the main strategists of the criminal invasion of Irak, as president of the World Bank, only emphasizes its destructive orientation.

29) To sum up, the World Bank is a despotic instrument in the hands of an international oligarchy (a handful of major powers and their transnational corporations) who bolster an international capitalist system that is detrimental to mankind and the environment.

30) A new international, democratic institution must urgently be found to promote a redistribution of wealth and to support the people’s efforts towards development that is socially just and respectful of nature.

31) It is necessary to make a radical break with the capitalist system of which the Bank is one of its mainstays.




Eric Toussaint is the President of the CADTM Belgium (Committee for the Abolition of the Third World Debt), and author of Your Money or Your Life. The Tyranny of Global Finance, Haymarket Books, Chicago, 2005, 487 pp; co-author with Damien Millet of The Debt Scam, VAK Publication, Mumbai, 2003 and Who Owes Who? 50 Questions about World Debt, Zedbooks, London, 2004; co-author with Damien Millet of Tsunami Aid or Debt Cancellation! The Political Economy of Post Tsunami Reconstruction,VAK Publication, Mumbai, 2005.

Translation : Judith Harris.

Footnotes

[1Eric Toussaint, 2005. Your Money or Your Life. Chapter 16: Rwanda: the genocide’s financiers.

[2Point 11, and also points 19, 22 and 24, will be developed in my next book “L’horreur productiviste”, to be published in 2007.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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